Astros owner sues Drayton McLane, Comcast and NBC claiming fraud

Jim Crane’s Astros ownership group filed a state court lawsuit Thursday against former Astros owner Drayton McLane, Comcast and NBC Universal, accusing them of fraud and civil conspiracy and accusing McLane’s corporation that owned the Astros of breach of contract in conjunction with Crane’s 2011 purchase of a 46 percent interest in the parent company of Comcast SportsNet Houston.

The suit accuses McLane, who sold the Astros and his CSN Houston share to Crane in 2011 for $615 million, of selling “an asset (the network) they knew at the time to be overpriced and broken.” It also says Crane was “duped” when he bought McLane’s network interest based on what have been proved to be “knowing misrepresentations” and “falsely inflated subscription rates.”

“Ultimately, fans of the Houston Astros have been injured because defendants’ misrepresentations leave (Crane) with an impossible choice: either accept the broken network as is and deprive thousands of fans the ability to watch Houston Astros games on their televisions, or distribute the game at market rates and take massive losses out of the Houston Astros player payroll – thereby dooming the franchise for years to come,” the suit adds.

The case has been assigned to 80th state District Judge Larry Weiman, and Crane’s Houston Baseball Partners demands a jury trial on its allegations of fraud, negligent misrepresentation or omission and civil conspiracy.

The Rockets, the third party in the Houston Regional Sports Network partnership that owns CSN Houston, are not named in the suit.

CSN Houston launched in the fall of 2012 but is available in only about 40 percent of Houston households and cannot be seen on DirecTV, Dish Network, AT&T U-verse or Suddenlink. That has limited the network’s revenues, which prevented the company from paying the bulk of the Astros’ $56.6 million rights fee for the 2013 season.

In late September, four Comcast affiliates filed an involuntary Chapter 11 bankruptcy case after the Astros informed the network that they might reclaim their broadcast rights, which likely would have driven the network out of business. That case remains pending.

Crane’s suit alleges that McLane and Rockets owner Leslie Alexander demanded in 2010 that Comcast charge a base subscriber rate for CSN Houston in Zone 1 – the area around Houston where Astros and Rockets games can be seen — that Comcast said was too high. In fact, the suit said, the rate was so high that Comcast feared it could not convince other distributors to carry the network.

Comcast eventually agreed to the inflated base rate, the suit said, in return for a most favored nation clause, which insured Comcast it would always pay the lowest base rate of any distributor.

Crane, according to the suit, was not aware of these facts when he was negotiating to buy the team in 2011 and that Comcast, NBC Universal and McLane agreed to “conceal material information” about the network’s business plan.

He also accuses Jon Litner, group president of the NBC Sports Group, of making false and misleading claims that the CSN Houston business plan was achievable, even though they were based on what the company knew were inflated subscriber rates.

Crane became aware of the 2010 demands by Alexander and McLane, according to the suit, during a December 2012 meeting in New York City, about a year after he bought the team and three months after the network launched.

The suit asks that McLane’s McLane Champions corporation be ordered to repay Crane’s group for losses that have resulted from alleged breaches of the group’s purchase agreement — including, presumably, more than $30 million in rights fees that the Astros failed to receive in 2013 and what Crane says is the “artificially inflated price” he paid for McLane’s network share. Court testimony has indicated that CSN Houston was valued in 2010 at $700 million, with McLane’s share valued at $326 million.

The suit also asks for undetermined damages plus interest and exemplary damages and attorneys’ fees.

Giles Kibbe, the Astros’ general counsel, said the team would have no comment until a Friday news conference at 1 p.m. McLane did not return a telephone call seeking comment.

Comcast and NBC Universal said in a statement: ”Comcast/NBCUniversal vehemently rejects any claim of wrongdoing asserted by the Astros. This litigation outside the bankruptcy proceedings is a desperate act, committed during a period in which Mr. Crane and his team of sophisticated advisors have been granted by the Bankruptcy Court an opportunity to explore and effectuate solutions to the Network’s serious business problems.

“Instead, it appears that Mr. Crane is suffering from an extreme case of buyer’s remorse, and aiming to blame the Network’s challenges on anything but his own actions. Comcast/NBCUniversal looks forward to vindicating itself in this litigation and also remains committed to a reorganization of the Network in Bankruptcy Court.”

Crane’s attorneys include David Boies, who represented Vice President Al Gore in Gore’s 2000 post-election lawsuit against George W. Bush and represented the Justice Department in its attempt to break up Microsoft.

In the sports realm, he represented the late Yankees owner George Steinbrenner in a lawsuit against Major League Baseball, represented the players association during the 2011 NBA lockout and was part of the NFL’s legal team in a 2011 antitrust suit.